The aviation industry is being held back by increasing costs and unhelpful taxation which is preventing growth, a major airline conference in London was told on Monday.
Air travel, be it people or cargo, is an important driver of economies across the world and should be recognised as such by policymakers and governments, who far too easily revert to the sector in order to raise tax revenue, the Airlines 2024 conference heard.
“There seems to be some kind of strange misconception about the profitability of the industry and the illusion of ticket prices and this seems to create some kind of impression of ‘we’ve got to rein in these airlines so that they don’t make so much profit’, but clearly that’s absolutely wrong,” the chief economist at IATA, Marie Owens Thomsen, said.
Working with Oxford Economics, the industry body Air Transport Action Group (Atag) found that in 2019, the aviation industry contributed $3.5 trillion to the world economy, accounted for 4.1 per cent of global GDP and moved 35 per cent of worldwide trade. In addition, the report calculated that if the aviation industry was a country, it would be the 17th-largest economy in the world. The year 2019 was used as a benchmark, because it represents pre-Covid stable conditions.
«Aviation’s continued success depends on its economic viability,» said Juan Carlos Salazar, secretary general of the International Civil Aviation Organisation (ICAO). To that end, much of the talk among delegates at the Airlines 2024 conference centred upon the taxes levied on airlines and especially in the case of the UK, the air passenger duty (APD).
Shai Weiss, chief executive of Virgin Atlantic, says successive UK governments have preferred to view the airline industry as an easy opportunity to raise tax revenue, rather than an essential engine of economic growth. “I don’t think in this country the government, either Labour or Conservative, have done a good job of identifying aviation as strategic national asset,» he said.
«This is an island nation – it’s obvious that we need a thriving aviation industry to promote growth and foreign direct investment. All we’ve seen is increasing APD, and by 2030 this industry will pay £6.5 billion of tax.”
Ms Owens Thomsen agreed and said that simultaneously taxing and promising to support aviation as an economic asset amounted to confusing and mixed signals from governments, because when an industry incurs added taxation «you’re saying that you want this activity to stop or decrease.
“Currently, the UK is deliberately through its tax policy saying to the universe they want this industry to not do so well,» she told the conference. «If we believe that we really need to grow to be able to solve our problems, and if we believe that aviation is a necessary ingredient in terms of producing that growth, then you get a very incoherent economic policy if you try to stop that activity”…
